Sunday, December 15, 2013

Published: December 15, 2013

Rising inequality isn’t a new concern. Oliver Stone’s movie “Wall Street,” with its portrayal of a rising plutocracy insisting that greed is good, was released in 1987. But politicians, intimidated by cries of “class warfare,” have shied away from making a major issue out of the ever-growing gap between the rich and the rest.

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That may, however, be changing. We can argue about the significance of Bill de Blasio’s victory in the New York mayoral race or of Elizabeth Warren’s endorsement of Social Security expansion. And we have yet to see whether President Obama’s declaration that inequality is “thedefining challenge of our age” will translate into policy changes. Still, the discussion has shifted enough to produce a backlash from pundits arguing that inequality isn’t that big a deal.

They’re wrong.

The best argument for putting inequality on the back burner is the depressed state of the economy. Isn’t it more important to restore economic growth than to worry about how the gains from growth are distributed?

Well, no. First of all, even if you look only at the direct impact of rising inequality on middle-class Americans, it is indeed a very big deal. Beyond that, inequality probably played an important role in creating our economic mess, and has played a crucial role in our failure to clean it up.

Start with the numbers. On average, Americans remain a lot poorer today than they were before the economic crisis. For the bottom 90 percent of families, this impoverishment reflects both a shrinking economic pie and a declining share of that pie. Which mattered more? The answer, amazingly, is that they’re more or less comparable — that is, inequality is rising so fast that over the past six years it has been as big a drag on ordinary American incomes as poor economic performance, even though those years include the worst economic slump since the 1930s.

And if you take a longer perspective, rising inequality becomes by far the most important single factor behind lagging middle-class incomes.

Beyond that, when you try to understand both the Great Recession and the not-so-great recovery that followed, the economic and above all political impacts of inequality loom large.

It’s now widely accepted that rising household debt helped set the stage for our economic crisis; this debt surge coincided with rising inequality, and the two are probably related (although the case isn’t ironclad). After the crisis struck, the continuing shift of income away from the middle class toward a small elite was a drag on consumer demand, so that inequality is linked to both the economic crisis and the weakness of the recovery that followed.

In my view, however, the really crucial role of inequality in economic calamity has been political.

In the years before the crisis, there was a remarkable bipartisan consensus in Washington in favor of financial deregulation — a consensus justified by neither theory nor history. When crisis struck, there was a rush to rescue the banks. But as soon as that was done, a new consensus emerged, one that involved turning away from job creation and focusing on the alleged threat from budget deficits.

What do the pre- and postcrisis consensuses have in common? Both were economically destructive: Deregulation helped make the crisis possible, and the premature turn to fiscal austerity has done more than anything else to hobble recovery. Both consensuses, however, corresponded to the interests and prejudices of an economic elite whose political influence had surged along with its wealth.

This is especially clear if we try to understand why Washington, in the midst of a continuing jobs crisis, somehow became obsessed with the supposed need for cuts in Social Security and Medicare. This obsession never made economic sense: In a depressed economy with record low interest rates, the government should be spending more, not less, and an era of mass unemployment is no time to be focusing on potential fiscal problems decades in the future. Nor did the attack on these programs reflect public demands.

Surveys of the very wealthy have, however, shown that they — unlike the general public — consider budget deficits a crucial issue and favor big cuts in safety-net programs. And sure enough, those elite priorities took over our policy discourse.

Which brings me to my final point. Underlying some of the backlash against inequality talk, I believe, is the desire of some pundits to depoliticize our economic discourse, to make it technocratic and nonpartisan. But that’s a pipe dream. Even on what may look like purely technocratic issues, class and inequality end up shaping — and distorting — the debate.

So the president was right. Inequality is, indeed, the defining challenge of our time. Will we do anything to meet that challenge?

A version of this op-ed appears in print on December 16, 2013, on page A25 of the New York edition with the headline: Why Inequality Matters.

Thursday, December 12, 2013

Antonio Garcia of the Party of the Democratic Revolution addressed the audience on Thursday in Mexico City after stripping down to his underwear during his speech to symbolize the stripping of Mexico's oil wealth.

CIUDAD DEL CARMEN, Mexico — Every gas station in Mexico is stamped with the green-and-white logo of the state-owned oil monopoly, the economic lifeblood of the government. Oil Expropriation Day, commemorating the day Mexico seized control of the industry from foreign companies in 1938, is celebrated with speeches and even parades in some towns. An old song, “The Oil Worker Hymn,” credits oil with “saving our fatherland.”

But now, in what could be the biggest economic change in two decades, President Enrique Peña Nieto is on the verge of rewriting the Constitution to open Mexico’s oil, gas and electricity industry to private investment — a provocative move expected to lure international oil companies and expand North America’s energy supply while testing the grip oil has on Mexico’s soul.

“We must defend our oil,” Cuauhtémoc Cárdenas, a three-time presidential candidate and son of the president who nationalized the oil industry, declared in a television advertisement. The state oil company, he said, belongs “to all Mexicans, and we must not allow it to go private.”

The legislation, which won final congressional approval on Thursday afternoon, declares that Mexico still owns its oil. But it allows private businesses to drill for oil and natural gas in partnership with the state monopoly, called Pemex, or on their own, returning international oil companies to territory they were kicked out of 75 years ago.

“They have been waiting for a long time for a true opportunity,” Jeremy M. Martin, director of the energy program at the Institute of the Americas, said of the oil companies.

In a country where oil is often equated with sovereignty and national pride, the plan has set off furious debate. But while demonstrations helped thwart a more tepid attempt to open the industry in 2008, they were not effective this time — though there were some colorful moments.

As the lower chamber of the legislature argued over the change, one leftist lawmaker stripped down to his black underwear to suggest that the country was giving away its most treasured resources. The change must be ratified by just over half of Mexico’s states in order to become law. Mr. Peña Nieto’s party controls a majority of the states.

The goal, Mr. Peña Nieto’s aides say, is to stimulate Mexico’s sliding oil production and vault the country into the developed world by tapping vast pockets of oil and natural gas deep under the earth and sea. Foreign oil companies have quietly lobbied the government to open up for years. Pemex, short for Petróleos Mexicanos, is known for inefficiency at best and corruption at worst.

The energy overhaul is the centerpiece of a series of changes Mr. Peña Nieto has pushed through this year with mixed results, including an effort to break up telecommunications monopolies, raise taxes and weaken the teachers union’s hold on faltering schools. His Institutional Revolutionary Party — which nationalized the oil industry in the first place, setting Mexico on its course toward industrialization — joined with conservatives who have long wanted the changes, casting off a weakened left.

Opinion polls suggest that Mexicans are growing impatient with Mr. Peña Nieto’s agenda and do not feel the benefits, as economic growth has slowed and the violence he promised to tackle persists largely unchecked.

Mr. Peña Nieto is banking that the energy changes will inject new life into the economy. Other presidents have failed in taking on the oil monopoly, a lifeblood to government coffers and a touchstone for the left.

“Oil has symbolic power in Mexico that it does not have in every oil country,” said Noel Maurer, a political economist at Harvard Business School. “Mexico has built up national mythologies that ‘the oil is ours.’ It’s like a flag-burning issue.”

Polls show that a majority of Mexicans generally oppose foreign investment in oil, but the passions may be fading. While schoolchildren are still taught about the nationalization of the industry, it is covered in just one page in the standard fifth-grade history textbook.

Even here in Ciudad del Carmen, where the discovery of one of the world’s largest oil fields at the end of the 1970s propelled the country to the top ranks of oil producers and turned this fishing village into a prominent oil town, the “it’s ours” passion has dwindled.

Foreign-run contracting companies are already ubiquitous here, providing a variety of services to offshore platforms and nearby wells. A common complaint is that the benefits of sovereign oil have been oversold.

“I laugh when I hear those arguments, ‘it’s our oil,’ ” said Enrique Sánchez, an engineer for a Pemex contractor. “I am still waiting for my payment.”

New malls, housing developments and big-box stores speak to the boom that oil exploration has provided, but many of the jobs have come from service contractors that pay less than Pemex, where a powerful union controls jobs and many speak of having to pay off leaders for entree.

The contractors’ orange jumpsuits and hard hats, in contrast to the yellow worn by Pemex workers, are far more visible on the streets, and skepticism about the new law runs deep.

“The rich will get richer,” said José Luis Gutiérrez, an oil platform welder preparing for a 14-day shift at sea. “It is our pride, our heritage, but up to now, the poor are still poor.”

Two decades after Mexico sold off banks and the telephone monopoly, Mexicans pay more for credit and phone service than other Latin Americans, and they suspect they will pay more for gas under the new law, too.

The government and oil industry analysts say Pemex cannot go it alone any longer. The urgency stems in part from the energy revolution in the United States, where cheap energy is helping American businesses.

Mexico’s oil production has declined by 25 percent from its 2004 peak, to just over 2.5 million barrels a day. Pemex is spending more to pump less: Investment has more than doubled in the same period, to more than $20 billion a year.

Mexico has abundant oil and natural gas reserves, but they are increasingly difficult and expensive to reach, far below the waters of the Gulf of Mexico and trapped in shale deposits deep below the earth. New technology has unlocked those sources of oil and gas around the world, particularly in the United States, but Pemex has not kept pace.

It is an appendage of the Mexican government, heavily taxed to fund as much as 40 percent of the national budget. To keep that money flowing, almost all of its investments have gone to pumping crude for export. It is also an enormous source of patronage, creating fortunes for contractors with political connections, including the union.

The union leader, Carlos Romero Deschamps, is a senator and a rich man whose spending extravagances and those of his children regularly make headlines here. The legislation ejects the union from the Pemex governing board but maintains other privileges.

Some on the left worry that as more efficient foreign companies move in, Pemex may ultimately lose control over a growing share of Mexico’s oil and gas reserves.

“Pemex needs major surgery, not euthanasia,” said Graco Ramírez, the leftist governor of the state of Morelos.

This city is already creaking under the growth, but a gold-rush mentality in anticipation of the new law is setting in.

“They’re already building three hotels, and many more people from other countries will be coming in,” said Nelson de Ganzer, who owns three Brazilian restaurants in town and has seen a surge of foreign workers among his customers. “This will be big for Mexico.”

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Since mid-November, four students at the University of California, Santa Barbara, have contracted a dangerous type of bacterial meningitis known as strain B, and one of them had to have both feet amputated because the infection had disrupted circulation to his legs. The other three students have recovered, said George Foulsham, a spokesman at the university.

The disease, which inflames the linings of the spinal cord and brain, is the same one that infected seven students and a visitor at Princeton University from March to November. But the two outbreaks are probably coincidental, Dr. Amanda Cohn, a meningitis expert at the Centers for Disease Control and Prevention, said in an interview. Tests show that even though the bacteria are the same strain, they have genetic differences, she said, adding that while campus outbreaks are not common, they do occur.

“We are looking at it closely on college campuses, but at this point it’s not out of the scope, but is at the higher end of what we normally see in a year,” Dr. Cohn said. “So we don’t suspect there’s anything changing.”

Last year there were 160 cases of strain B meningitis in the United States. It is not clear where the disease comes from or why outbreaks occur. Some people carry the bacteria in their throats without getting sick, but they may transmit them to others who, for reasons that are not understood, are more vulnerable and become ill. The meningitis vaccines that are widely used in the United States and recommended for college students do not protect against strain B.

The disease is spread by respiratory secretions, but is not considered highly contagious. People are thought to be at risk if they have been in close contact or share cups or eating utensils with someone who became ill. Those who may have been exposed are advised to take antibiotics preventively, and so far about 1,000 of the 18,000 undergraduates at Santa Barbara have been given the drugs, Mr. Foulsham said.

Students are being urged to seek medical help immediately if they have fevers, headaches, a stiff neck or flulike symptoms. Citing medical privacy concerns, Mr. Foulsham would not disclose information about any of the affected students.

But The Los Angeles Times and other news media outlets have reported that one student, Aaron Loy, a freshman lacrosse player, had to have his feet amputated. A spokesman for the family could not be reached, but Mr. Loy’s parents have chronicled his illness on a website, describing a grueling series of operations and a slow, painful recovery.

Bacterial meningitis is fatal in about 11 percent of cases, and among survivors, about one in five has severe consequences like amputations or brain damage.

Health officials have recommended that all students at Princeton be vaccinated against strain B meningitis, and the injections are expected to start next week, Dr. Cohn said. The vaccine, called Bexsero, has been approved in Europe and Australia, but not in the United States. However, the Food and Drug Administration has given permission for it to be used at Princeton. So far, the vaccine has not been recommended for Santa Barbara students. Dr. Cohn said it was recommended for Princeton because the outbreak did not seem to be dying out.

A version of this article appears in print on December 6, 2013, on page A22 of the New York edition with the headline: Meningitis Outbreak Strikes Two Colleges.

Much of the media commentary on President Obama’s big inequality speech was cynical. You know the drill: it’s yet another “reboot” that will go nowhere; none of it will have any effect on policy, and so on. But before we talk about the speech’s possible political impact or lack thereof, shouldn’t we look at the substance? Was what the president said true? Was it new? If the answer to these questions is yes — and it is — then what he said deserves a serious hearing.

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And once you realize that, you also realize that the speech may matter a lot more than the cynics imagine.

First, about those truths: Mr. Obama laid out a disturbing — and, unfortunately, all too accurate — vision of an America losing touch with its own ideals, an erstwhile land of opportunity becoming a class-ridden society. Not only do we have an ever-growing gap between a wealthy minority and the rest of the nation; we also, he declared, have declining mobility, as it becomes harder and harder for the poor and even the middle class to move up the economic ladder. And he linked rising inequality with falling mobility, asserting that Horatio Alger stories are becoming rare precisely because the rich and the rest are now so far apart.

This isn’t entirely new terrain for Mr. Obama. What struck me about this speech, however, was what he had to say about the sources of rising inequality. Much of our political and pundit class remains devoted to the notion that rising inequality, to the extent that it’s an issue at all, is all about workers lacking the right skills and education. But the president now seems to accept progressive arguments that education is at best one of a number of concerns, that America’s growing class inequality largely reflects political choices, like the failure to raise the minimum wage along with inflation and productivity.

And because the president was willing to assign much of the blame for rising inequality to bad policy, he was also more forthcoming than in the past about ways to change the nation’s trajectory, including a rise in the minimum wage, restoring labor’s bargaining power, and strengthening, not weakening, the safety net.

And there was this: “When it comes to our budget, we should not be stuck in a stale debate from two years ago or three years ago. A relentlessly growing deficit of opportunity is a bigger threat to our future than our rapidly shrinking fiscal deficit.” Finally! Our political class has spent years obsessed with a fake problem — worrying about debt and deficits that never posed any threat to the nation’s future — while showing no interest in unemployment and stagnating wages. Mr. Obama, I’m sorry to say, bought into that diversion. Now, however, he’s moving on.

Still, does any of this matter? The conventional pundit wisdom of the moment is that Mr. Obama’s presidency has run aground, even that he has become irrelevant. But this is silly. In fact, it’s silly in at least three ways.

First, much of the current conventional wisdom involves extrapolating from Obamacare’s shambolic start, and assuming that things will be like that for the next three years. They won’t. HealthCare.gov is working much better, people are signing up in growing numbers, and the whole mess is already receding in the rear-view mirror.

Second, Mr. Obama isn’t running for re-election. At this point, he needs to be measured not by his poll numbers but by his achievements, and his health reform, which represents a major strengthening of America’s social safety net, is a huge achievement. He’ll be considered one of our most important presidents as long as he can defend that achievement and fend off attempts to tear down other parts of the safety net, like food stamps. And by making a powerful, cogent case that we need a stronger safety net to preserve opportunity in an age of soaring inequality, he’s setting himself up for exactly such a defense.

Finally, ideas matter, even if they can’t be turned into legislation overnight. The wrong turn we’ve taken in economic policy — our obsession with debt and “entitlements,” when we should have been focused on jobs and opportunity — was, of course, driven in part by the power of wealthy vested interests. But it wasn’t just raw power. The fiscal scolds also benefited from a sort of ideological monopoly: for several years you just weren’t considered serious in Washington unless you worshipped at the altar of Simpson and Bowles.

Now, however, we have the president of the United States breaking ranks, finally sounding like the progressive many of his supporters thought they were backing in 2008. This is going to change the discourse — and, eventually, I believe, actual policy.

So don’t believe the cynics. This was an important speech by a president who can still make a very big difference.

A version of this op-ed appears in print on December 6, 2013, on page A35 of the New York edition with the headline: Obama Gets Real.